Kenneth Feinberg is an expert.
Collusive class actions.
Limiting the liability of toxic tortfeasors.
And covering up corporate and governmental wrongdoing.
That’s the take of public interest attorney Rob Hager.
Feinberg is now working to limit the liability of BP in the Gulf oil spill case.
But Hager first ran into Feinberg while litigating the Agent Orange case back in the 1980s.
Hager was representing Vietnam veteran Don Ivy.
Federal court judge Jack Weinstein was seeking to impose a settlement on thousands of such cases brought by veterans against the companies that made Agent Orange – the dioxin-laced herbicide used in Vietnam.
Weinstein even had a settlement figure in mind – $180 million – half of what the chemical companies were willing to settle for.
He brought in Feinberg to “do his dirty work,” Hager told Corporate Crime Reporter in an interview last week.
“Weinstein’s mission was to limit the liability of the defendants,” Hager says. “That’s very clear.”
“Weinstein felt that lawyers would be encouraged to bring more toxic tort cases into the federal courts if the Agent Orange litigation were successful.”
“The Second Circuit Court of Appeals called the $180 million settlement a nuisance value settlement.”
“And Weinstein wanted to make sure that the settlement amount was viewed as a nuisance value settlement.”
“He didn’t want it to go up to what the defendants were willing to pay – which was at least double – $360 million – or even much more if Weinstein had actually allowed the case to go before a jury.”
“That number would just keep going up.”
“Agent Orange victims could have obtained the largest recovery in American history because of the number of veterans involved, the bad actions of the defendants in covering up the fact that their product had dioxin in it, and the predictably favorable attitude of juries toward the claimants.”
“So, it was looking to be a major historic case. And Weinstein put a lid on it and kept a lid on it, saving Dow, Monsanto and the other chemical companies from potential bankruptcy.”
“And Feinberg helped him do that.”
“More important for our purposes, Feinberg learned at the knee of the master how to do this – how to keep the companies off the hook of liability for massive tort.”
“That $180 million figure was Weinstein’s figure – it wasn’t a negotiated figure between the parties.”
“Weinstein needed somebody like Feinberg to go out and make the threats that Weinstein was going to direct a summary judgment against the veterans on proof of causation.”
“That would be inappropriate for a judge to do. But Feinberg was able to do it because everything that Feinberg did was off the record.”
“There’s a very sparse record of what Feinberg did during Agent Orange because it was in the interests of the lawyers ultimately to keep their mouths shut and make sure at the end of the day their legal fees were adequate.”
“Feinberg was brought in by Weinstein for this very important role of fixing the settlement.”
“And then Weinstein appointed Feinberg to help distribute the funds.”
For the most part, Hager says, the plaintiff lawyers representing the veterans were part of the problem.
They were colluding with the companies and with Weinstein and Feinberg to limit the damage to the companies.
There were exceptions – lawyers like Victor Yannacone – who had the trust of the veterans.
But lawyers like Yannacone were eventually pushed aside.
“Yannacone was generally opposed to the settlement. There is an interesting quote in a book by Peter Schuck – Agent Orange on Trial. It’s on page 200.”
“In that book, Yannacone tells of a meeting between himself and Feinberg where Judge Weinstein was looking on.”
“Yannacone says that Feinberg offered him the role of executive director of the settlement fund if he cooperated by supporting the settlement and also that his legal fees would be affected accordingly.”
“Feinberg claims he was only asking Yannacone to help convince the veterans – who were still loyal to Yannacone at that point – to approve the settlement.”
“Now Yannacone’s account may or may not be true. But the fact that Yannacone told that to an author indicates his attitude toward how the case was handled and Feinberg’s role as Weinstein’s agent.”
The lawyers who took control of the Agent Orange litigation and pushed aside Yannacone became “fabulously rich,” Hager said.
Feinberg too became wealthy as a result of the collusive class actions.
“During the period after Agent Orange until at least the late 1990s – the heyday of the collusive class actions – plaintiffs lawyers were getting fabulously rich – and Feinberg was getting rich with them – by colluding in settlement class actions to keep people out of court,” Hager said.
In the Gulf oil spill case, Hager says Feinberg’s job is to save BP as a viable company.
“Feinberg’s job is to get BP through this whole thing without the trauma of bankruptcy, where shareholders and managers are replaced,” Hager said.
“In fact, without the trauma of a very big impact on their bottom line at all.”
“If they lose a few quarters of profits – maybe even a year of profits – without eroding their assets, and they go on to be just as profitable as they have been in the future – that’s success to Feinberg, and a hiccup for the company.”
“If the potential and future claims exceed the assets of BP – if they predictably do now, or in the future will – then the victims should become the owners of BP as fast as possible before the assets get siphoned off,” Hager said.
“You cut out the shareholders, and fire the managers.”
“The judgment creditors become the owners. And BP would be operated for their benefit. That would be the just thing to do.”
“This might also be the rare situation where the government should stand in for the victims as parens patriae.”
But as he has throughout his career, Feinberg is working for the corporation – not for its victims.
A quick glance at his law firm’s web site – feinbergrozen.com – makes this clear.
His clients are Fortune 500 companies – like Altria, Eli Lilly, Exxon, GE, Pfizer, Purdue Pharma, and Shell.
Feinberg told the Washington Post – “that one case Agent Orange changed my entire professional career.”
In his book, Feinberg writes that “Fortune 500 companies suddenly wanted me to settle everything. My life changed overnight. . .I helped create a whole new area of practice. . .I became a settlement guru.”
This new area of practice was the collusive class action tort settlements invented by Weinstein in Agent Orange in 1984.
(Hager has written an article about collusive class actions.)
Judge Weinstein brought Feinstein back to try to settle the asbestos cases, the DES cases and the case of the nuclear contractors at Shoreham, Hager said.
And now President Obama has brought him in to limit BP’s liability.
We know who Feinberg is, Hager says.
“The real question is – what is Obama’s motivation in appointing this guy when he has followed a career of helping corporations escape the consequences of inflicting massive injuries and helping government to cover-up its misdeeds?”
Is there a written agreement governing the BP $20 billion fund?
The White House did not return calls seeking comment.
Hager says we don’t know.
“But I wouldn’t be surprised that there is no written agreement,” Hager said. “Feinberg is going to get some money. Both Obama and BP trust him. He’s done this so many times in the past. He’s covered everybody who needed to be covered. It is the service he provides.”
Is there an agreement covering Feinberg’s fee?
“We don’t know that either,” Hager said. “He might have said – we’ll work it out later. He’s already made a lot of money doing these things.”
“In 9/11, he notionally waived his fee. But he got 1.2 percent of the total $7 billion for administrative costs. So, he was spending a lot of money during the whole three years or so that he was working on that case. He had his very substantial costs covered. Over $80 million in three years.”
“So, he has the flexibility to make all kinds of different deals here.”
“He may even waive his fee in the BP case.”
RUSSELL MOKHIBER is editor of Corporate Crime Reporter.
[For a complete transcript of the Interview with Rob Hager, see 24 Corporate Crime Reporter 27(9), July 5, 2010, print edition only.]